Secondary Sources: Lawmakers’ Pay, Underground Economy, Incarceration

ByPhil Izzo

A roundup of economic news from around the Web.

–Lawmakers’ Pay: The Economist charts lawmaker pay around the world. “A new report that proposes a salary increase for Britain’s members of Parliament while wages for ordinary Britons are stagnating, is, therefore, a sensitive matter. The report is the result of a consultation by the Independent Parliamentary Standards Authority, a regulatory body that was set up in the wake of a 2009 scandal that revealed the extent to which MPs were bending (or breaking) their own generous rules on expenses. Under the new recommendations, MPs’ basic salaries would rise from £66,396 ($105,400) to £74,000 in 2015, but they would lose other lucrative perks such as final salary pensions. Britain’s legislators currently earn the equivalent of around 2.7 times the country’s GDP per person, on a par with many rich countries. Indeed, their basic pay is relatively parsimonious when compared with that of their compatriots elsewhere. Lawmakers in poorer countries in Africa and Asia in particular enjoy the heftiest salaries by this measure. Kenyan MPs, known for their largesse, were recently stymied in an attempt to increase their salary from $75,000 to $120,000 a year. In Thailand, the governing party’s MPs are paid more than those of the opposition.”

–Underground Economy:Roberto A. Ferdman says Spain’s underground economy is 20% of GDP. “Illicit activity, while technically illegal, doesn’t necessarily mean drug-related or violent. Much of Spain’s unreported business is due to labor law and tax circumvention, which varies widely from industry to industry. Some sectors are relatively clean, like Spain’s financial industry, where the rate of illegal activity is believed to hover below 10%; others are ridden with messy, unreported business, like the country’s construction industry—Spain’s most flagrant offender—whose rate clocks in at 35%.”

–Incarceration:Anna Aizer and Joseph Doyle examine the long-term impact of incarcerating juveniles. “The US imprisons more young people at a higher rate than any other nation. This column argues that, at a tremendous cost, incarcerating juveniles only serves to reduce their educational attainment and increase the probability of incarceration as an adult. New research suggests that using the numerous available alternatives will probably not only save the US money in the short run — as well as giving juvenile criminals better prospects in the future — but will also reduce future crime and thus future expenditures in the long run.”

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